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In November of 1992, Georgia voters passed an amendment to Georgia’s Constitution to create the Georgia Lottery. Governor Miller established three distinct and individually funded lottery programs: the HOPE Scholarship Program, the Georgia Pre-K program (a voluntary prekindergarten program for four-year olds) and an instructional technology program for those pursuing work ready skills in our technical colleges, the HOPE Grant. As Lottery revenues grew, the programs were expanded.

Since its creation, the HOPE Scholarship has provided benefits totaling more than $5 billion to over 1.2 million students pursuing post-secondary education. Georgia Pre-K has served over one million children.

However, over time as enrollment and tuition have increased and as more and more four year olds have been served by Georgia’s Pre-K program, the lottery has begun paying out more than it brings in. If this pattern continues, by FY 2013 all of the reserves will have been expended and lottery will not be able to meet its obligations.

This legislation will make the programmatic changes necessary to preserve these invaluable education programs for future generations. All of the lottery-funded programs – Pre-K, HOPE Scholarship and HOPE Grant – must be part of the solution by sharing in the necessary program reductions. The current funding ratios for these programs will remain the same: Georgia Pre-K will continue to receive 1/3 of lottery funds deposited into the Lottery for Education Account; higher education programs, including HOPE Scholarship, HOPE Grant, HOPE GED and need-based aid will continue to receive 2/3.

HOPE Scholarship

Provides scholarships that reward students with financial assistance in degree programs at eligible Georgia public and private colleges and universities.

· Maintains the current merit-based HOPE Scholarship for students with a grade point average (“GPA”) of 3.0, but adjusts the scholarship amount annually based on lottery revenues. This decouples HOPE scholarship benefits from rising tuition rates and ensures that HOPE is sustainable for future generations. (estimated savings: $133M)

In the fall of 2011, HOPE Scholars will receive 90 percent of the FY ’11 standard tuition rate for attending public colleges and universities in the state and HOPE Scholars attending private postsecondary institutions in the state will receive 90 percent of the current private HOPE award which is $4000.

· Creates the Zell Miller Scholarship program to reward Georgia’s best and brightest students and to encourage them to remain in Georgia to pursue postsecondary education. Zell Miller Scholars will be those students who graduate from high school as valedictorian or salutatorian, or who have a GPA of 3.7 or higher and have received a score of at least 1200 combined on the Critical Reading Score and Math Score on the SAT or have received a score of at least 26 on the ACT. These students will represent approximately the top ten percent of all HOPE Scholars.

Zell Miller Scholars attending any public college or university in the state will be awarded full tuition scholarships, while those attending private institutions will receive the full private HOPE award.

· Adds a seven year window of eligibility for HOPE scholars beginning on July 1st in the year in which the student graduates from high school and ending 7 years later on June 30th (exception: years served in the military do not count against this seven-year window) (estimated savings: $2M)

· Students who lose the HOPE Scholarship by having a GPA below 3.0 at one of the established checkpoints will be given a single second chance to regain HOPE. (estimated savings: $2.4M)

· Beginning with the high school graduating class of 2015, students will be required to demonstrate that they have taken a certain number of rigorous courses in high school in order to be eligible to receive the HOPE scholarship. This will help to ensure that HOPE scholars are prepared for college-level work and do not need remediation when they enroll in our postsecondary institutions.

HOPE Grant

Provides grants to students seeking a diploma or certificate at public postsecondary institutions.

· This decouples HOPE grant benefits from rising tuition rates and ensures that the HOPE grant is sustainable for future generations; the grant amount will be adjusted annually based on lottery revenues. In the fall of 2011, HOPE grant recipients will receive 90 percent of the FY ’11 grant award.

· Requires students to earn a 3.0 GPA by the first HOPE check point, once enrolled in technical college courses; currently, 68% of students have a GPA of 3.0 or higher at the 45 hour checkpoint. (estimated savings: $15M)

· Provides that students who already possess a postsecondary degree are ineligible to receive the HOPE Grant; currently, 2% of students using the HOPE grant already possess a bachelor’s degree or higher. (estimated savings: $2.8M)

The aim of the Georgia Lottery Corporation is to maximize revenues for specific education programs by providing entertaining lottery products and quality customer service to retailers and players, while maintaining the integrity of the Georgia Lottery Corporation and its games. The Georgia Lottery Corporation has experienced unprecedented sales and returns to education in its 16-year operation - with sales exceeding $35 billion. Since its inception, the GLC has transferred more than $12 billion to the State Treasury's Lottery for Education Account.

· Limits bonuses paid to the Georgia Lottery Corporation employees to no more than 25 percent of their base compensation. In total, bonuses shall not exceed 1 percent of the net increase over the prior year’s deposit into the Lottery for Education Account. No bonuses may be awarded in years in which there is not a net increase over the prior year’s deposit into the Lottery for Education Account

· Lowers the commission paid to lottery retailers from an average of 7 percent to 6 percent of gross sales. Provides that the Lottery Corporation may provide for other forms of incentive compensation beginning on July 1, 2016; provided, however, that other forms of incentive compensation may be provided beginning on July 1, 2014, if the Lottery for Education Account deposits exceed $1 billion in the previous fiscal year or may be provided prior to July 1, 2016, as authorized by the Governor. (estimated savings: $34.5M)

Need-Based Aid

Funding intended to help students pay expenses incurred while going to college, including tuition and fees, room and board, books and supplies.

· This legislation does not change current provisions related to the Pell Grant. HOPE Scholarship funds will be paid in full without taking Pell eligibility into account. Pelleligible students will then be able to use these federal funds to cover the costs of collegegoing expenses beyond tuition costs.

o The Federal Pell Grant Program provides need-based grants to low-income students to promote access to postsecondary education.

o A Federal Pell Grant, unlike a loan, does not have to be repaid.

o The maximum Pell Grant award for the 2010-11 (July 1, 2010 to June 30, 2011) and 2011-12 (July 1, 2011 to June 30, 2012) is $5,550. The amount depends on a student’s financial need, costs to attend school, status as a full-time or part-time student, and plans to attend school for a full academic year or less.

· In 2008, the Georgia General Assembly passed legislation which created a one percent student loan program; however, funds have never been appropriated to this fund. To ease the burden of affording a college education and to encourage more private sector support for the one percent loan program, the state will now contribute $10M to the one percent loan program and will pledge another $10M through a challenge-matching grant.

o Although there has been no publicity of this program, over $125K has been contributed to the one percent loan program to date from individuals across Georgia. These contributions were made via the state income tax return check off, and checks were written directly to the Georgia Student Finance Commission.

o This bill also amends the original one percent loan legislation to provide that these loans can be forgiven altogether if loan recipients become certified and teach in a public K-12 school in the STEM field. Georgia has a critical shortage of qualified math and science teachers and this will encourage more students to prepare to enter the teaching profession in these areas of critical need. Each year of service in the classroom will forgive one year of the student loan.

The Tuition Equalization Grant (TEG)

TEG was established in the 1970s to promote the private segment of higher education in Georgia by providing non-repayable grant aid to Georgia residents who attend eligible private postsecondary institutions.

· Governor Deal supports TEG funding and his FY ‘12 budget recommendation includes funding for the TEG. This legislation does not affect these funds for Georgia residents attending private postsecondary institutions in the state.

Non-Core Lottery-Funded Programs

There are a number of programs that have been funded by the Georgia Lottery over the years that are outside the core programs of the HOPE Scholarship, HOPE Grant and Georgia Pre-K. These programs will be continued either through lottery funds or moved to state general appropriations.

· The following program will continue to be funded with lottery proceeds:

o HOPE GED: The purpose of this appropriation is to award a $500 voucher to students who earn a general educational development (GED) diploma and then within two years enroll in an eligible postsecondary institution in the state to further their education.

· The following programs are currently funded by the Georgia lottery but will be funded using state general appropriations moving forward:

o Accel: The purpose of this appropriation is to allow students to pursue postsecondary study at approved public and private postsecondary institutions, while receiving dual high school and college credit for courses successfully completed. ($5.7M)

o Public Safety Memorial Grant: The purpose of this appropriation is to provide educational grant assistance to children of Georgia law enforcement officers, fire fighters, Emergency Medical Technicians (EMTs), correctional officers and prison guards who were permanently disabled or killed in the line of duty, to attend a public postsecondary institution in Georgia. ($306K)

o Engineer Scholarship: The purpose of this appropriation is to provide forgivable loans to Georgia residents who are engineering students at Mercer University (Macon campus) with the goal of keeping them in the state to work in the field of engineering. ($550K)

o Georgia Military College Scholarship: The purpose of this appropriation is to provide outstanding students with a full scholarship to attend Georgia Military College, thereby strengthening Georgia's National Guard with their membership. ($1.23M)

Lottery Reserve

There are currently three lottery reserves but because we are decoupling tuition from the HOPE Scholarship and taking other measures to ensure that our lottery expenditures do not outpace lottery revenue, there will no longer be a need for all three reserve accounts moving forward.

· Provides that there will be a shortfall reserve account and requires that the balance be at least 50% of the net lottery deposits from the preceding fiscal year

· If the net proceeds paid into the Lottery for Education Account in any year are not sufficient to meet the amount appropriated for education purposes, the shortfall reserve may be drawn upon to meet the deficiency.

· In the event the shortfall reserve is drawn upon and falls below 50% of the net proceeds deposited into such account for the preceding fiscal year, the shortfall reserve shall be replenished to the level required in the next fiscal year and the lottery-funded programs shall be reviewed and adjusted accordingly.

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